Softbank Group SOTP Valuation Update

Update as of Friday, Feb 14, 2020.

This is not investment advice. Please read the disclaimer.

Compared to my last Sum-Of-The-Parts Valuation of Softbank Group (9984 JP) many of the “moving parts” moved quite a bit. Most noteworthy developments were:

  1. Elliot, an activist hedge fund bought a considerable stake of Softbank Group (c. 3 bn USD) and could (i) help narrowing the discount to SBGs Net Asset Value or NAV and (ii) improve management quality / governance supporting better investment processes, i.e. to prevent things like the WeWork debacle in the future.
  2. The TMUS-Sprint merger in the US is now much more likely to go ahead pushing Sprints Stock price upwards, even if there is a realistic chance that the deal terms are changed to a slight disadvantage to Sprints and SBGs side (the reasoning is based on the two shares performance since the original deal: TMUS performed very good, Sprint was quite down).

Based on updated numbers for standalone Net Debt as well as market prices of SBG and Sprint and other assets as of Feb 14th, my SOTP valuation results in the following (conservative scenario: 30% tax discount applied to Alibaba, YahooJapan Stakes, SVF valued at 0x):
NAV is at 185 bn USD compared to a current Market Cap of 105 bn USD only, indicating a discount from NAV of 43%. For the time being, this discount is still big enough for me to hold my Shares in Softbank Group, considering that Elliot increased the chances of shrinking the discount to NAV furhter in the future, substantially.

Best, s4v.

6 thoughts on “Softbank Group SOTP Valuation Update

  1. Merger terms between TMUS and Spint were revised: T-mobile shareholders will receive about 11 Sprint share for each TMUS share, up from 9.75 before. It’s a better deal for Deutsche Telekom /TMUS. Softbank shares rose nonetheless, since the deal is more likely to go through now!

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  2. Hi User,

    Thank you very mch for your kind words.

    To which post about Softbank are you exactly refering?
    (Since in my Initial Softbank SOTP Valuation from Oktober, 2019 valueing SFV at Zero was only one of several Scenarios, I assume you refer to my valuation update from Feb 14.)

    Ned Debt Number
    Net debt in my valuation update from Feb 14 is from SBGs Investor presentation (slide #23; p. 26/36).
    Checked the value with other Sources.
    Important: Stand Alone net debt. I.e. Sprints debt is consolited in SBGs reported Consolidated numbers, BUT (some of) Sprints debt is non recourse. Meaning: If sprint goes bankrupt, SBG does not have to pay for it.
    So, I believe it is Logical to use stand alone net within this SOTP valuation.

    Softbank Vision Fund (SVF) valued at 0x
    End of january I wrote Issues regarding Softbank Group, some were
     pushing private Startup Valuations: valueing a private Company higher in each Funding round, and thus showing (paper-)Profits on the stakes bought early
     The (Rescue) Financing deal for WeWork (We Inc.) was questionable (reason: saving face?) and highlits Risk that future deals might not be reanoable but more emotional
     SVF II seems quite unlikely to be funded at favorable Terms to SBG
     Employees paint a Picture of bad governancy at SBG/SVF (bloomberg article)
     Oyo (after WeWork)

    In General VC is driven by a few Investments returning a multiple of ones invesmtent (and many being a total loss of capital). The expected value of the priv. Investments has shifted to the lower side for me, still, only a few stellar Investments could turn Things around. But I would rather like to err on the conservative side. The Financing strukture (7% for debt like Investments) is another reason.

    Thank you very much and happy investing!

    Best, s4v

    Message:
    Hi There,

    I hope all is going well on your side?
    Thanks again for your writing, keep it up!

    Was briefly looking at your valuation of Softbank.
    Please can you show me how you got to the ned debt number? i.e. Source of Debt and Cash amounts.
    Also curious why the Softbank vision is valued at 0x?

    Apologies may have missed info on the website.

    Thanks again,
    User

    Liked by 1 person

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